Fiscal Cliff Compromise Could Decrease Charitable Donations

ROCKVILLE, Md. (WUSA) -- Itemized deductions on your tax returns are just some of the battlegrounds in the fiscal cliff deliberations, and one of the casualties could be charitable donations.

For Americans in the top tax bracket, the president's proposed 2013 budget would limit the amount of itemized deductions to 28% of their income. It's a way to raise revenue without increasing the tax rate. According to the Tax Policy Center, ending all itemized deductions would raise around $2.2 trillion over 10 years. But it's also a way for more Americans, especially wealthy Americans, to not get a tax break for their charitable donations.

"It means that they may not actually get a deduction for their charitable donations, which will really alter how much they are going to contributed," said Stephen Bradford with Tax Masters Incorporated.

Let's say you live in Montgomery County, you're filing as an individual, and you make $250,000 a year. Under the White House proposal, your itemized deductions would now be limited to just $70,000. So if you're already deducting roughly $50,000 worth of mortgage interest and $20,000 for state income taxes, that's your $70,000 limit right there.

"So really the only thing that you can make a decision about in terms of how much you can contribute or how much you can take as a deduction are your charitable contributions," said Bradford.

Charitable organizations are understandably concerned that that decision might mean less charitable donations, especially in the greater Washington area.

"People make more money in this area so they're going to be affected by this limitation much more than people in the midwest where there adjusted gross income is going to be much lower," said Bradford.